Gujarat State Police Housing Corporation Ltd., Gandhinagar V. The ACIT, GNR Circle, Gandhinagar

ITA 2549/AHD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76915 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 19-06-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 30-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVETIA
• Keywords: Principle of natural justice; Rule of consistency; Capital receipt
• Section: 148; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ITA NO.2549/AHD/2013 A.Y.2010-11 GUJARAT STATE POLICE HOUSING CORPORATION LTD., SECTOR 10/A, CH ROAD, GANDHINAGAR. PAN: AAACG 5532C VS ACIT, GNR-CIRCLE GANDHINAGAR. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SUBHASH BAINS, CIT- D.R., ASSESSEE(S) BY : SHRI S. N. DIVETIA, A.R. / // / DATE OF HEARING : 19/06/2014 / DATE OF PRONOUNCEMENT: 18/07/2014 / O R D E R SHRI MUKUL KUMAR SHRAWAT (JUDICIAL MEMBER) THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FRO M AN ORDER OF THE LD. CIT(A), GANDHINAGAR, DATED 02.09.2013. THE APPELLANT HAS RAISED ONE ISSUE IN RESPECT OF AN ADDITION PERTAINING TO I NTEREST INCOME OF RS.20,42,86,950/-. HOWEVER IN RESPECT OF THIS SINGL E ISSUE, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS: 1. THE ORDER PASSED U/S.250 ON 2-9-2013 FOR A.Y.2010-1 1 BY C1T(A)-GNR AHMEDABAD UPHOLDING THE ADDITION IN RESPECT OF INTE REST INCOME OF RS.20,42,86.950/- MADE BY AO IS WHOLLY ILLEGAL, UN LAWFUL AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 1.2 THE LD. C1T(A) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN NOT CONSIDERING FULLY AND PROPERLY THE SUBMISSIONS MADE AND EVIDENCE PRODUCED BY THE APPELLANT WITH REGARD TO THE IMPUGNED ADDITI ON. 2.1. THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THAT THE INTEREST INCOME OF RS.20,42,86,950 BELONGE D TO THE APPELLANT-CORPN. ITA NO.2549/AHD/2013 GUJARAT STATE POLICE HOUSING CORP. LTD. VS. ACIT, G NR CIRCLE, GANDHINAGAR FOR A.Y. 2010-11 - 2 - 2.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. CIT(A) OUGHT NOT TO HAVE UPHELD THAT THE INTEREST I NCOME OF RS.20,42,86,950/- BELONGED TO THE APPELLANT-CORPN. 3.1 THE LD.CIT(A) HAS ERRED IN UPHOLDING THAT THE INTEREST INCOME OF RS.20,42,86,950 WAS CHAJGEABLE IN THE HANDS OF THE APPELLANT-CORPN . 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) DATED 24.12.2012 WERE THAT THE AS SESSEE IS IN THE CONSTRUCTION ACTIVITY FOR THE PROJECT OF POLICE DEP ARTMENT. ON PERUSAL OF INCOME AND EXPENDITURE ACCOUNT, IT WAS NOTED BY THE AO THAT THE ASSESSEE HAD SHOWN AN INCOME OF RS.21,30,95,206/- WHICH COMP RISES OF MAINLY AN INTEREST INCOME OF RS.20,42,86,950/- RECEIVED ON IC D. HOWEVER, AS PER THE STATEMENT OF INCOME NIL RETURN WAS SHOWN. THE ASSESSEE WAS ISSUED A SHOW CAUSE NOTICE THAT WHY THE INTEREST WAS NOT T O BE ADDED IN THE TAXABLE INCOME. THE ASSESSEES MAIN REPLY WAS THAT THE CORPORATION IS A WHOLLY OWNED GOVERNMENT COMPANY AND A NODAL AGENCY FOR CARRYING OUT CONSTRUCTION AND MAINTENANCE FOR HOME DEPARTMENT, G OVERNMENT OF GUJARAT. IT WAS FURTHER EXPLAINED THAT ANY INCOME R ECEIVED SUCH AS INTEREST INCOME, TENDER FEES WERE CREDITED IN THE R ESPECTIVE ACCOUNTS, BUT TRANSFERRED AT THE END OF THE YEAR IN THE PROJECT C OST BY REDUCING THE PROJECT COST. THE PROJECT COST IS FINALLY TRANSFERR ED TO THE GOVERNMENT ACCOUNT. IT WAS ALSO EXPLAINED TO AO THAT THE PARKI NG OF SURPLUS FUND WAS ALSO DONE AS PER THE DIRECTIVES OF THE GOVERNMENT; THEREFORE, IT WAS KEPT WITH GSFS. THERE WAS A STANDING INSTRUCTION OF FINA NCE DEPARTMENT, GOVERNMENT OF GUJARAT TO INVEST THE SURPLUS FUND WI TH GSFC. 3. HOWEVER, THE AO WAS NOT CONVINCED AND ACCORDING TO HIM THERE WERE SYSTEMATIC INVESTMENT IN FDRS FOR A LONG PERIO D OF TWO YEARS. THE ASSESSEE WAS AWARE AT THE TIME OF KEEPING MONEY IN FDR THAT THERE WAS SURPLUS FUND AVAILABLE ON WHICH INTEREST INCOME COU LD BE EARNED. THE AO ITA NO.2549/AHD/2013 GUJARAT STATE POLICE HOUSING CORP. LTD. VS. ACIT, G NR CIRCLE, GANDHINAGAR FOR A.Y. 2010-11 - 3 - HAS ALSO MENTIONED THAT THERE WAS NO OPTION IN THE GRANT ACCOUNT FOR INTEREST INCOME, WHICH MEANS THAT INTEREST WAS NOT A PART OF THE GRANT OF THE GOVERNMENT. THE DEPOSITS WERE KEPT IN THE NAME OF THE ASSESSEE AND THE INTEREST WAS COLLECTED IN THE ACCOUNTS OF THE A SSESSEE. THE AO HAS GIVEN FOLLOWING REASONS TO ASSESS THE INTEREST INCO ME IN THE HANDS OF THE ASSESSEE: 1) FDRS WERE KEPT FOR A LONG PERIOD OF TWO YEARS I N ALMOST ALL CASES I.E. DEPOSIT NO.16355 WAS KEPT ON 5/4/2007 AND ITS MATUR ITY DATE IS 30/03/2009. SIMILARLY FDR OF 16356 WAS KEPT ON 05/04/2007 WHICH IS HAVING DUE DATE OF 06/04/2009. THUS FDRS ARE KEPT FOR TWO YEARS WHICH CANNOT BE TERMED AS PARKING OF SURPLUS FUNDS OF UNUSED GRANTS. THIS MON EY WAS INTENTED AS NOT TO BE USED FOR A LONG PERIOD. THIS IS A SYSTEMATIC INV ESTMENT IN FDRS. WHEN THE FDR WERE KEPT IT WERE KEPT FOR A LONG PERIOD OF TWO YEARS WHICH MEANS THAT AT THE TIME OF KEEPING FDR IT WAS KNOWN THAT IT WAS A LONG TERM SURPLUS FUNDS AVAILABLE WITH THE COMPANY. 2) SCHEDULE 2 OF PRINTED BALANCE SHEET PRINTED ON PAGE NO. 18 SHOWS STATUS OF DIFFERENT GRANTS. THERE IS NO ADDITION IN THE GRANT ACCOUNT ON ACCOUNT OF INTEREST THIS' MEANS THAT INTEREST IS NOT A PART OF GRANT AS IT IS NOT INCLUDED IN GRANT AS CLOSING BALANCE OF THE GRANT. THE RELEVANT SCHEDULE IS REPRODUCED ON SUBSEQUENT PAGE. 3) ALL THE DEPOSITS ARE KEPT IN THE NAME OF ASSESS EE AND ALL CREDITS OF INTEREST IS RECEIVED BY THE ASSESSEE. 4) ALL EXPENSES SHOWN UNDER INCOME & EXPENDITURE AC COUNT ARE PAID FROM RESPECTIVE GRANT ACCOUNT AND ARE NOT ADJUSTED AGAIN ST INCOME. HENCE QUESTION OF ALLOWING EXPENSES AGAINST INCOME DOES NOT ARISE. 3.1 THE ASSESSEE HAS PLACED RELIANCE UPON THE DECIS ION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT AND ANOTHER VS. KARNATAKA URBAN INFRASTRUCTURE, 284 ITR 582 (KARNATAKA). 4. THE AO HAS FURTHER NOTED AS FOLLOWS: THE ASSESSEE RECEIVED GRANT WHICH IS PARKED WITH G SFS, GSFS PAYS INTERST AND CLAIMS INTEREST AS EXPENSES. GSFC USES THIS AMO UNT FOR GIVING LOAN TO ANOTHER GOVERNMENT UNDERTAKING AND RECEIVED INTERES T ON THAT AND SHOWS IT AS INCOME. THE GOVERNMENT UNDERTAKING WHICH HAS TAK EN LOAN FROM GSFS CLAIMS INTEREST AS EXPENSES. THUS IN A PROCESS INTEREST EXPENSES ARE CLAIMED AS EXPENSES TWO TIMES. (I) BY GSFS AND (II) BY OTHER GOVERNMENT UNDERTAKING WHO TAKES LOAN FROM GSFS. ITA NO.2549/AHD/2013 GUJARAT STATE POLICE HOUSING CORP. LTD. VS. ACIT, G NR CIRCLE, GANDHINAGAR FOR A.Y. 2010-11 - 4 - WHILE INCOME IS OFFERED ONLY IN ONE HAND I.E. IN HA NDS OF (I) GSFS THUS GOVERNMENT FUNDS ARE ROUTED THROUGH GSFS IN SU CH A WAY THAT IT ENABLES ONE GOVERNMENT ENTITY TO CLAIM INTEREST EXP ENDITURE AND THEREBY REDUCE ITS TAX LIABILITY WITHOUT INCREASING TAX LIA BILITY OF ANOTHER GOVERNMENT ENTITY. THUS ENTIRE INCOME RECEIVED AS INTEREST FRO M GSFS REMAINS OUT OF TAX NET WHICH IS REQUIRED TO BE ADDED. 5. THE AO HAS GIVEN A TABULATION OF THE INTEREST IN COME AND THEREAFTER HAS CALCULATED THE INTEREST INCOME AT RS .20,42,86,950/- AS THE TAXABLE INCOME IN THE HANDS OF THE ASSESSEE. BEING AGGRIEVED THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 6. BEFORE LEARNED CIT(A), IT WAS REITERATED THAT TH E ASSESSEE IS A GOVERNMENT ENTITY AND WORKED AS A NODAL AGENCY FOR IMPLEMENTING VARIOUS PROJECTS. HE FINDS NO MERIT IN THE EXPLANAT ION OF THE ASSESSEE ON ACCOUNT OF THE FOLLOWING REASONS: I) THE APPELLANT IS A SEPARATE ENTITY FROM GOVER NMENT OF GUJARAT AND WORKING AS A NODAL AGENCY FOR IMPLEMENTING VARIOUS PROJECTS FOR WHICH VARIOUS GRANTS ARE RECEIVED BY THE APPELLANT DURING THE YEAR WHICH ARE PARKED BY THE APPELLANT IN GSFS AND THE SAME WERE PLACED I N THE FORM OF FDRS FROM 1 MONTH TO 15 MONTHS IN THE NAME OF THE APPELLANT O N WHICH THE APPELLANT HAS EARNED TOTAL INTEREST OF RS.20,42,86,950/-. ON THE ONE HAND THE CORPORATION IS PAYING INTEREST ON BORROWINGS WHICH IS BEING DEBITE D AS AN EXPENDITURE AND ON THE OTHER HAND THE INCOME EARNED AS INTEREST INC OME IS NOT BEING OFFERED FOR TAXATION AND TRANSFERRED TO WIP FOR APPROPRIATI ON UNDER THE HEAD SURPLUS FUNDS. II) IT IS ALSO A FACT THAT THE MONEY IS BEING PA RKED IN GSFS ON THE DIRECTIVES OF GOVERNMENT OF GUJARAT WHICH IS ALSO A SEPARATE L IMITED ENTITY AND TAXABLE UNDER THE PROVISIONS OF INCOME-TAX ACT AND GSFS HAS BEEN DEBITING RS.20,42,86,950/- IN ITS BALANCE SHEET AS A PAY MENT MADE TO GUJARAT STATE POLICE HOUSING CORPORATION LTD AND NOT TO GOV ERNMENT OF GUJARAT. HENCE, IT IS A : NATURAL PRINCIPLE UNDER THE INCOME-TAX ACT THAT IF AN AMOUNT IS DEBITED AT ONE SIDE, IT HAS TO BE CREDITED ON THE O THER SIDE IN THE SAME MANNER. IN THE CASE OF GSFS, IT IS CLAIMING THE INTEREST AS A DEDUCTION WHICH IS REQUIRED TO BE TAXED IN THE HANDS OF GUJARAT STATE POLICE HOUSING CORPORATION LTD. (III) THOUGH GUJARAT STATE POLICE HOUSING CORPORATI ON LTD GOT VARIOUS DIRECTIVES THROUGH VARIOUS LETTERS OF ADDL. SECRETA RIES AND SECRETARIES ARE ON RECORD ON WHICH BASIS THE APPELLANT HAS ACTED UPON FOR PLACING THE MONEY AS WELL AS UTILISATION AND TREATMENT OF SURPLUS MONEY, WHICH ARE MERE DIRECTIVES ITA NO.2549/AHD/2013 GUJARAT STATE POLICE HOUSING CORP. LTD. VS. ACIT, G NR CIRCLE, GANDHINAGAR FOR A.Y. 2010-11 - 5 - OF THE GOVERNMENT OF GUJARAT BUT NOT ON THE BASIS O F ANY LEGISLATION WHICH IS OVERRIDING THE PROVISIONS OF SECTION 56 OF IT ACT, 1961. THE FACT IS THAT THERE IS AN INCOME OF RS.20,42,86,950/- AS INTEREST EARNE D AND BROUGHT IN THE P&L ACCOUNT OF THE APPELLANT BUT ULTIMATELY TRANSFERRED TO THE WIP ACCOUNT ON THE DIRECTIONS OF GOVERNMENT OF GUJARAT WHICH IS NOT PE RMISSIBLE UNDER ANY PROVISIONS OF THE INCOME-TAX ACT. 7. FROM THE SIDE OF THE ASSESSEE, LEARNED AR, MR. S .N. DEVITIA HAS GIVEN A SYNOPSIS OF THE CASE AS UNDER: THE BRIEF FACTS OF THE APPLICANT'S CASE ARE THAT T HE APPLICANT IS A A WHOLLY- OWNED GOVT. COMPANY AND ACTING AS NODAL AGENCY FOR CARRYING OUT VARIOUS TYPES OF CONSTRUCTION, MAINTENANCE AND REPAIR WORK FOR HOME DEPT., GOVT. OF GUJARAT, AT PRESENT, ITS MAIN ACTIVITY IS TO MONITO R THE FUNDS AND CONSTRUCTION OF RESIDENTIAL/NON-RESIDENTIAL BUILDINGS FOR POLICE /JAIL DEPT. THE CENTRAL AND STATE GOVERNMENT FUNDS TO THE APPELLANT FOR IMPLEME NTING THE AFORESAID OBJECTS. THE MONEY SO RECEIVED FROM THE GOVT. ARE P ARKED BY THE APPELLANT WITH GUJARAT STATE FINANCIAL SERVICES (FOR SHORT 'G SFS) AND BANKS TILL THE SAME ARE REQUIRED FOR DISBURSEMENT OR EXPENDITURE. THE BUILDINGS SO CONSTRUCTED BY THE APPELLANT CORPN., BELONG TO THE GOVT. AND EVEN NO CHARGES ARE RECOVERED BY THE CORPORATION FOR ACTING AS NODA L AGENCY FOR THESE ACTIVITIES. IT IS WORKING AS A NON PROFIT ORGANIZAT ION AND THE ENTIRE INCOME AND COST ARE CHARGED TO THE CONCERNED PROJECTS. 2.1 DURING THE COURSE OF ASSTT. PROCEEDINGS THE AO NOTICED THAT THE APPELLANT- CORPORATION HAD SHOWN INTEREST INCOME OF RS. 20,42, 86,950 ON ICD PLACED WITH GSFS WHICH WAS NOT OFFERED TO TAX BUT TRANSFER RED TO 'WORK-IN- PROGRESS/WORK COMPLETED'. THE APPELLANT VIDE LETTER DT. 6-12-2012 EXPLAINED THAT THE PARKING OF FUNDS WAS DONE IN ACCORDANCE WI TH THE DIRECTIVES OF GOVT. AND INTEREST INCOME WAS CAPITAL RECEIPT. REFER TO G R NO.JNV-1099-5233-A DATED 31.12.1999 OF FINANCE DEPT. OF GOVT. OF GUJAR AT (P. 6-7 OF PB). HOWEVER, THE AO REJECTED THE CLAIM OF THE APPELLANT MAINLY ON THE GROUND THAT THE ENTIRE INTEREST INCOME FROM GSFS WOULD REM AIN OUT OF TAX NET AND IT WAS A PARKING OF FUNDS IN THE NAME OF THE APPELLANT -CORPORATION SO THAT THE SAID INCOME WAS CHARGEABLE TO TAX. 2.2 BEING AGGRIEVED, THE APPELLANT PREFERRED APPEAL BEFORE THE CIT(A) WHO CONFIRMED THE IMPUGNED ADDITION FOR THE IDENTICAL R EASON AND ALSO DISTINGUISHED THE CASE LAW RELIED UPON BY THE APPEL LANT. 2.3 THE APPELLANT IS NOW IN APPEAL BEFORE THE HON. TRIBUNAL AND CONTENDS THAT THE IMPUGNED ADDITION IS WHOLLY UNJUSTIFIED BO TH ON FACTS AND IN LAW AS UNDER:- (I) FIRSTLY, THE PERUSAL OF THE G.R. DATED 1.9.1988 OF GOVT. OF GUJARAT (SEE P, 1-2 OF PB) SHOWS THAT IT WAS ESTABLISHED TO ACT AS A NODAL AGENCY FOR IMPLEMENTATION OF THE WORKS OF POLICE HOUSING, BOTH CENTRAL & STATE GOVT. WERE TO PROVIDE REQUISITE FINANCE FOR IMPLEMENTATIO N OF THE SAID PROJECT. SINCE THE OBJECTIVE TO CREATE THE CORPORATION WAS TO HAVE AN AUTONOMOUS BODY FOR THE WORKS OF POLICE HOUSING, THE FUNDS WERE PLACED AT ITS DISPOSAL AND UTILIZED FOR CONSTRUCTION MAINTENANCE AND REPAIRS OF THE RES IDENTIAL AND NON- ITA NO.2549/AHD/2013 GUJARAT STATE POLICE HOUSING CORP. LTD. VS. ACIT, G NR CIRCLE, GANDHINAGAR FOR A.Y. 2010-11 - 6 - RESIDENTIAL BUILDINGS OF POLICE AND JAIL DEPARTMENT . THUS, IT WAS ESTABLISHED FOR NON-PROFIT MOTIVE AND THE INTEREST INCOME ON IC D WITH GSFS THOUGH IN THE NAME OF CORPORATION WAS TO BE APPLIED ONLY FOR THE SAID PURPOSE. THE WHOLE OF THE FUNDS BELONGED TO THE STATE EXCHEQUER AND THE A PPELLANT WAS ONLY TO CHANNELIZE THEM FOR THE OBJECTS OF POLICE HOUSING. THE MONEY SO RECEIVED TILL THEY WERE UTILIZED, WERE TO BE PARKED WITH GSFS AS PER THE ORDER DATED 31.12.1999. THEREFORE, THE INTEREST INCOME EARNED F ROM ICD WITH GSFS DID NOT BELONG TO THE APPELLANT CORPORATION BUT TO THE GOVERNMENT. IT WAS HOLDING THE FUNDS RECEIVED FROM GOVERNMENT INCLUDING THE IN TEREST INCOME EARNED FROM PARKING WITH GSFS IN TRUST AND THERE WAS AN OV ERRIDING OBLIGATION TO HOLD AND UTILIZE FOR POLICE HOUSING ON BEHALF OF TH E STATE GOVERNMENT. THE INTEREST INCOME DID NOT REACH TO THE APPELLANT AS I TS OWN INCOME SO AS TO BE CHARGEABLE IN ITS HANDS, IT MAY BE STATED THAT INSO FAR AS THE BUILDINGS SO CONSTRUCTED BY THE APPELLANT, IT HAS NOW BEEN SETTL ED POSITION THAT THE SAME DO NOT BELONG TO THE APPELLANT-CORPORATION AS HELD IN ITS OWN CASE FOR A.Y.I996- 97 IN TAX APPEAL NO. 1103 OF 2009 BY DECISION DATED 1.3.2011 OF HON. GUJARAT HIGH COURT. (P. 23-25). (II) SECONDLY, THE APPELLANT CORPORATION HAS CONSIS TENTLY FOLLOWED THE PRACTICE OF ACCOUNTING THE FUNDS RECEIVED FROM GOVERNMENT AN D OTHERS AS CURRENT LIABILITY IN THE BALANCE SHEET AND THE CONSTRUCTION WORK AS CURRENT ASSETS AND NOT AS FIXED ASSETS. EVEN, THE CHART ENCLOSED HEREW ITH SHOWING THE APPLICATION OF INTEREST INCOME EARNED DURING THE YEAR ALSO PROV ES THAT THE SAID FUNDS HAVE BEEN UTILIZED TOWARDS CONSTRUCTION WORK AS WORKS CO MPLETED OR WORK-IN- PROGRESS WHICH HAS BEEN SHOWN IN BALANCE SHEET. THE NOTE APPENDED BY WAY OF ACCOUNTING PRACTICE TO THE AUDITED BALANCE SHEET , PROVES THAT THE APPELLANT IS CARRYING ON ACTIVITIES ON NO-PROFIT NO-LOSS BASI S AND THE FUNDS ARE TRANSFERRED / UTILIZED FOR EARMARKED ACTIVITIES/PUR POSES. THIS PRACTICE IS BEING FOLLOWED SINCE INCEPTION AND IT HAS BEEN ACCEPTED B Y DEPARTMENT SO THAT FOLLOWING THE RULE OF CONSISTENCY, THE INTEREST INC OME OUGHT NOT TO HAVE BEEN HELD AS BELONGING TO THE APPELLANT CORPORATION AND CHARGEABLE IN ITS HANDS, (III) THIRDLY, THE CONTENTION OF AO THAT THE FUNDS WERE PARKED FOR LONG TERM AND IN ITS NAME IS ALSO NOT TENABLE BECAUSE THE UNU TILIZED FUNDS HAVE TO BE PARKED AS PER THE DIRECTIVES OF THE STATE GOVERNMEN T. THE PERUSAL OF THE CHART OF INTEREST INCOME (P. 4-5 OF PB) SHOWS THAT THE DE POSITS WERE PLACED WITH MATURING AT REGULAR INTERVALS AND IN CASE IN CASE O F NEED, THE SAME HAVE ALSO BEEN WITHDRAWN PREMATURELY. THE ENTIRE CONDUCT OF T HE APPELLANT CORPORATION RIGHT FROM RECEIVING THE FUNDS TO THE DISBURSEMENT AND PARKING THESE FUNDS SHOWS THAT IT HAS NOT ACTED AS ITS OWN FUNDS BUT ON BEHALF OF THE GOVT. AND SUBJECT TO THE DIRECTIVES OF THE GOVT. MOREOVER, THE CONTENTION OF BOTH THE LOWER AUTHORIT IES THAT THE GSFS WOULD CLAIM EXPENDITURE AND INCOME WOULD BE NON-TAXABLE W ITH APPELLANT IS NOT TENABLE BECAUSE IT IS NOW WELL-SETTLED THAT IN ORDE R TO FIND OUT WHETHER THE RECEIPT IS CAPITAL OR REVENUE, ONE HAS TO SEE WHAT IT IS IN THE HANDS OF RECEIVER AND NOT ITS NATURE IN THE HANDS OF THE PAYER. THE N ATURE OF RECEIPTS IS DETERMINED ENTIRELY BUY ITS CHARACTER IN THE HANDS OF RECEIVER AND THE SOURCE HAS NO BEARING ON THIS QUESTION. (REFER TO CIT VS. KAMAL BEHARI LAL SINGHA) [82 ITR 460] (SC). ITA NO.2549/AHD/2013 GUJARAT STATE POLICE HOUSING CORP. LTD. VS. ACIT, G NR CIRCLE, GANDHINAGAR FOR A.Y. 2010-11 - 7 - (IV) FOURTHLY, THE CASE LAW RELIED UPON BY THE APPELLANT BEFORE THE CIT(A) HAS BEEN DISTINGUISHED ON INCORRECT REASONING. SAY FOR EXAMPLE, THE DECISION IN THE CASE OF KARNATAKA URBAN INFRASTRUCTURE DEVELOPM ENT & FIN. CORPN. (284 ITR 582) HAS BEEN DISTINGUISHED STATING THAT THERE WAS NO SUCH MEGA CITY SCHEME LAUNCHED BY THE STATE GOVT. SIMILARLY, THE D ECISION IN THE CASE OF GUJARAT POWER CORPN. (354 ITR 201) HAS BEEN DISTING UISHED BY STATING THAT THERE WAS SPECIFIC STIPULATION FOR UTILIZATION OF M ONEY, HOWEVER, CIT(A) HAS ESCAPED THE FACT THE FUNDS WERE PLACED AT THE DISPO SAL OF APPELLANT- CORPORATION FOR SPECIFIC PURPOSE AND THEY WERE SO U TILIZED. HENCE, THE IMPUGNED ADDITION SHOULD BE DELETED. 8. WE HAVE HEARD BOTH THE SIDES. WE HAVE BEEN INFOR MED THAT FOR A.Y. 1996-97 AN APPEAL WAS FILED BY THE REVENUE DEP ARTMENT BEFORE HONBLE ITAT. HONBLE ITAT B BENCH AHMEDABAD IN I TA NO.2219/AHD/2008 VIDE AN ORDER DATED 30 TH SEPTEMBER, 2008 HAS TAKEN A VIEW IN RESPECT OF INCOME FROM HOUSE PROPERTY THAT THERE WAS NO JUSTIFICATION FOR THE IMPUGNED ADDITION ON THE NOTI ONAL RENTAL VALUE OF THE FLATS CONSTRUCTED BY THE ASSESSEE. IT WAS ALSO HELD BY THE RESPECTED CO- ORDINATE BENCH THAT THERE WAS NO CONSISTENCY OF APP ROACH BY THE REVENUE DEPARTMENT. THE DELETION BY LEARNED CIT(A) WAS THER EFORE UPHELD. 8.1 NOW BEFORE US, AN ORDER OF HONBLE GUJARAT HIGH COURT PRONOUNCED IN THE CASE OF SAR INFRACON PVT. LTD. (T AX APPEAL NO.828 OF 2013) WHEREIN VIDE AN ORDER DATED 30 TH OF OCTOBER, 2013 THE VIEW TAKEN IS AS UNDER: 5.1 IT APPEARS THAT THE ASSESSEE RECEIVED GRANT F ROM THE CENTRAL GOVERNMENT TO THE TUNE OF RS.16.70 CRORES AND A SUM OF RS.5.56 CRORES AS CONTRIBUTION/GRANT FROM GHB. THE ASSESSEE DID NOT U TILIZE THE SAID GRANT, HOWEVER, DEPOSITED THE SAID SUM IN THE BANK OF INDI A AS FIXED DEPOSIT AND EARNED INTEREST OF RS.1,25,44,938/-. IT APPEARS THA T THE BANK OF INDIA DEDUCTED TDS OF RS.25,59,075/- ON THE SAID INTEREST AMOUNT. THE ASSESSEE CLAIMED REFUND OF RS.25,59,075/-, BEING THE TDS DEDUCTED ON THE AFORESAID AMOUNT OF RS.1,25,44,938/- TREATING IT AS INCOME, WHICH PROMP TED THE ASSESSING OFFICER TO INITIATE PROCEEDINGS AND ISSUANCE OF NOTICE UNDE R SECTION 148 OF THE ACT. THE ASSESSING OFFICER HAS TREATED THE AFORESAID AMO UNT OF RS.1,25,44,938/- RECEIVED BY THE ASSESSEE BY WAY OF INTEREST ON THE FIXED DEPOSIT OF RS.16.70 ITA NO.2549/AHD/2013 GUJARAT STATE POLICE HOUSING CORP. LTD. VS. ACIT, G NR CIRCLE, GANDHINAGAR FOR A.Y. 2010-11 - 8 - CRORES AS WELL AS ON CONTRIBUTION RECEIVED FROM GHB AS INCOME OF THE ASSESSEE AND MADE ADDITION OF RS.1,25,44,938/- IN T HE INCOME OF THE ASSESSEE. THE SAID ORDER CAME TO BE CONFIRMED BY THE CIT [A]. ON APPEAL, THE TRIBUNAL BY IMPUGNED ORDER HAS DIRECTED TO DELETE THE ADDITI ON OF RS.1,25,44,938/- BY HOLDING THAT CONSIDERING THE LETTER ISSUED BY THE C ENTRAL GOVERNMENT RELEASING THE GRANT AND MORE PARTICULARLY CONSIDERI NG THE CONDITION THAT, THE INTEREST EARNED ON THE CENTRAL GRANT ALREADY RELEAS ED WOULD FORM PART OF THE CENTRAL GRANT LIMIT OF RS.50 CRORES AND CONSIDERING THE DECISIONS OF THIS COURT IN THE CASE OF GUJARAT MUNICIPAL FINANCE BOARD V. DEPUTY COMMISSI ONER OF INCOME-TAX [ASSESSMENT] [SUPRA] AND IN CASE OF GUJARAT POWER CORPORATION LIMITED V. INCOME TAX OFFICER [SUPRA], THE TRIBUNAL HAS HELD THAT THE AFORESAID AMOUNT OF RS. 1,25,44,938/- EARN ED BY THE ASSESSEE AS INTEREST ON THE FIXED DEPOSIT OF RS. 16.70 CRORES A ND RS. 5.56 CRORES RECEIVED AS CONTRIBUTION FROM GUJARAT HIRA BOURSE CANNOT BE SAID TO BE ITS INCOME. CONSIDERING THE CONDITION IMPOSED BY THE 1 CENTRAL GOVERNMENT, WHILE RELEASING THE GRANT IN FAVOUR OF THE ASSESSEE, WHEN THE INTEREST EARNED ON THE CENTRAL GRANT ALREADY RELEASED WAS REQUIRED TO BE F ORMING PART OF THE CENTRAL GRANT, THE LEARNED TRIBUNAL HAS RIGHTLY HELD THAT T HE INTEREST EARNED ON RS. 16.70 CRORES AND CONTRIBUTION/GRANT RECEIVED FROM G HB CANNOT BE SAID TO BE THE INCOME OF THE ASSESSEE. AS SUCH, THE ISSUE INVO LVED IN THE PRESENT TAX APPEAL IS DIRECTLY COVERED BY THE DECISIONS OF THIS COURT IN CASE OF GUJARAT MUNICIPAL FINANCE BOARD V. DEPUTY COMMISSIONER OF I NCOME-TAX [ASSESSMENT] {SUPRA} AND IN CASE OF GUJARAT POWER CORPORATION LIMITED V. INCOME TAX OFFICER [SUPRA]. 6. SHRI MANAV MEHTA, LEARNED ADVOCATE APPEARING FOR THE APPELLANT-REVENUE HAS AS SUCH TRIED TO DISTINGUISH THE FACTS BY SUBMI TTING THAT IN THE PRESENT CASE, THE ASSESSEE ITSELF CLAIMED REFUND OF THE TDS DEDUCTED BY TREATING THE AMOUNT OF INTEREST AS INCOME, AND THEREFORE, THE TR IBUNAL HAS COMMITTED AN ERROR IN NOT TREATING THE AMOUNT OF INTEREST EARNED ON THE GRANT AS INCOME OF THE ASSESSEE. THE AFORESAID CONTENTION HAS NO SUBST ANCE. WHAT IS IMPORTANT IS WHETHER THE INTEREST EARNED ON THE CENTRAL GOVERNME NT GRANT IS TO BE TREATED AS THE INCOME EARNED OR NOT, AND NOT WHAT THE ASSES SEE CLAIMED. AS STATED HEREINABOVE, IN THE LETTER OF THE CENTRAL GOVERNMEN T RELEASING THE GRANT, WHICH PROVIDES A CONDITION THAT THE INTEREST EARNED ON THE CENTRAL GRANT ALREADY RELEASED WOULD FORM PART OF THE CENTRAL GRA NT LIMIT OF RS. 50 CRORES, THE AMOUNT OF RS. 1,25,44,938/- BEING INTEREST EARN ED ON THE FIXED DEPOSIT OF RS. 16.70 CRORES WHICH WAS THE GRANT RECEIVED BY TH E ASSESSEE FROM THE CENTRAL GOVERNMENT CANNOT BE SAID TO BE ITS INCOME AND THE AFORESAID SUM, AS PER THE CONDITION OF RELEASE OF GRANT, THE INTEREST EARNED ON THE CENTRAL GOVERNMENT GRANT IE., RS. 1,25,44,938/- IN THE PRES ENT CASE IS TO BE INCLUDED AS A PART OF THE GRANT RECEIVED FROM THE CENTRAL GO VERNMENT. 7. UNDER THE CIRCUMSTANCES, AS SUCH, NO ERROR HAS B EEN COMMITTED BY THE TRIBUNAL IN DELETING THE ADDITION OF RS.1,25,44,938 /- MADE BY THE ASSESSING OFFICER, TREATING IT AS THE INCOME OF THE ASSESSEE. ITA NO.2549/AHD/2013 GUJARAT STATE POLICE HOUSING CORP. LTD. VS. ACIT, G NR CIRCLE, GANDHINAGAR FOR A.Y. 2010-11 - 9 - 8.2 THERE IS ONE MORE ORDER OF THE HONBLE GUJARAT HIGH COURT PRONOUNCED IN THE CASE OF CIT VS. GUJARAT STATE DISASTER MANAGEMENT AUTHORITY , ORDER DATED 18 TH JULY, 2011, WHEREIN THE VIEW EXPRESSED WAS AS UNDER: AS FAR AS ISSUE NO.2 IS CONCERNED, THE TRIBUNAL HA S LARGELY DEPENDED ON JUDGMENT OF GUJARAT HIGH COURT IN THE CASE OF GUJAR AT MUNICIPAL FINANCE BOARD (SUPRA). AS IN THE CASE OF GRANT, IT HAS HELD THAT THE INTEREST DERIVES BY INVESTING THE GRANT TEMPORARILY FOR INTEREST IS ALS O NOT TAXABLE. IT DID NOT CONFIRM WITH THE VIEW OF CIT(APPEALS) THAT THE ASSE SSEE TREATED THE GRANTS GIVEN BY THE STATE GOVERNMENT AS ITS INCOME AND THE REFORE THE INTEREST EARNED BY TEMPORARY INVESTMENT OF THE GRANTS CANNOT BE EXE MPTED BY HOLDING THAT RATIO IN THE SAID JUDGMENT IS THAT ANY GRANT-IN-AID CANNOT BE CONSIDERED AS INCOME AND MERELY BECAUSE THE GRANT IS TREATED AS I NCOME BY THE ASSESSEE IN ITS BOOKS, THE INTEREST DOES NOT BECOME TAXABLE. 8.3 RESPECTFULLY FOLLOWING THESE TWO DECISIONS OF T HE JURISDICTIONAL HIGH COURT, WE HEREBY HOLD THAT IN A SITUATION WHEN THE ASSESSEE HAD RECEIVED THE GRANT FROM THE GOVERNMENT OF GUJARAT A S A NODAL AGENCY FOR CONSTRUCTING THE HOUSES FOR THE POLICE DEPARTMENT A ND RECEIVED INTEREST ON THE TEMPORARY PARKING OF FUNDS ON THE INSTRUCTIO N OF THE GOVERNMENT, THEREFORE, THE INTEREST SO EARNED BEING PART OF THE GRANT SHOULD NOT BE TAXED AS INCOME IN THE HANDS OF THE ASSESSEE. THE A LLEGED INTEREST INCOME WAS EARNED WITH AN OVERRIDING CHARGE THAT THE SAME SHOULD NOT BE THE INCOME OF THE ASSESSEE BUT PART OF THE GRANT. HENCE , WE HEREBY REVERSE THE VIEW OF LEARNED CIT(A) AND ALLOW THIS GROUND OF THE ASSESSEE. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. SD/- SD/- (ANIL CHATURVEDI) (MUK UL KR. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 18/07/2014 PRABHAT KR. KESARWANI, SR. P.S. ITA NO.2549/AHD/2013 GUJARAT STATE POLICE HOUSING CORP. LTD. VS. ACIT, G NR CIRCLE, GANDHINAGAR FOR A.Y. 2010-11 - 10 - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT. 3. #$#% ' '& / CONCERNED CIT 4. ' '&() / THE CIT(A)-III, AHMEDABAD 5. )*' %, ' ' % , ,-$ / DR, ITAT, AHMEDABAD 6. *./ 0 / GUARD FILE. / BY ORDER, 1 11 1/ // /,' #2 ,' #2 ,' #2 ,' #2 ( DY./ASSTT.REGISTRAR) ' ' % ' ' % ' ' % ' ' % , , , , ,-$ ,-$ ,-$ ,-$ / ITAT, AHMEDABAD